Hadibhai K.Charnia, Pune V. ITO, Pune

ITA 1723/PUN/2012

• Counselvise Citation: 172324514 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 22-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Unexplained cash credit; Peak credit
• Section: 68; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1723/PN/2012 (ASSESSMENT YEAR 2006-07) HADIBHAI K. CHARANIA, M/S. EMPIRE FOOTWEAR, 291, M.G. ROAD, PUNE 411001 .. APPELLANT PAN NO.AANPC8622P VS. ITO, WARD-4 (5), PUNE .. RESPONDENT APPELLANT BY : SHRI PRAMOD SHINGTE RESPONDENT BY : SHRI S.P. WALIMBE DATE OF HEARING : 24-12-2013 DATE OF PRONOUNCEMENT : 30-12-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 11-05-2012 OF THE CIT(A)-II, PUNE RELATING TO ASSES SMENT YEAR 2006-07. LEVY OF PENALTY OF RS.1,55,000/- BY THE ASSESSING O FFICER U/S.271(1)(C) WHICH HAS BEEN UPHELD BY THE CIT(A) IS THE ONLY ISS UE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PARTNER IN M/S.EMPIRE FOOTWEAR, EARNING SHARE OF PROFIT, INTER EST ON CAPITAL AND REMUNERATION. HE ALSO DERIVES INCOME FROM HOUSE PR OPERTY AND OTHER SOURCES SUCH AS INTEREST ON FDS, SAVINGS BANK ACCOU NT ETC. HE FILED HIS RETURN OF INCOME ON 24-07-2006 DECLARING TOTAL INCO ME OF RS.2,19,040/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER VERIFIED VARIOUS BANK ACCOUNTS MAINTAINED BY THE AS SESSEE. FROM THE 2 VARIOUS DETAILS FURNISHED BY THE ASSESSEE, HE NOTIC ED THAT THE ASSESSEE HAS NOT DISCLOSED THE SAVINGS BANK ACCOUNT BEARING NO.1 9600 MAINTAINED WITH DENA BANK, CAMP BRANCH, PUNE. ON SCRUTINISING THE SAID BANK ACCOUNT THE ASSESSING OFFICER NOTED THAT THERE ARE SEVERAL CASH DEPOSITS MADE IN THE SAID BANK ACCOUNT DURING THE YEAR AND S UCH DEPOSIT COMES TO RS.15,28,714/- WHICH INCLUDES RS.15,19,500/- IN CAS H AND RS.9,214/- TOWARDS BANK INTEREST AND OTHER CREDITS. HE, THERE FORE, ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF SUCH CASH DEPOSITS. 2.1 THE ASSESSEE IN HIS REPLY SUBMITTED AS UNDER WH ICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORDER AT PAGE 3. I HAVE DEPOSITED CASH IN THE SAID ACCOUNT FROM TIME T O TIME AND ALSO WITHDRAWN CASH FROM TIME TO TIME. THE PEAK BALANCE IN THIS ACCOUNT IS RS.4,96,615/-. AS REGARDS SOURCES OF CASH DEPOSIT I WISH T O STATE THAT I HAVE OPENED THIS ACCOUNT TO SAFEGUARD THE SAVING OF MY DAUGHTER MISS. SABANA H. CHARNIA AND MY DAUGHTER-IN-LAW MRS. RESHMA S. CHARANIA. MY DAUGHTER MISS SABANA H. CHARANIA WAS ASSESSED TO INCOME T AX IN INDIA UPTO A.Y. 2001-02 AND THEREAFTER MARRIAGE SHE MIGRAT ED TO USA. MY DAUGHTER-IN-LAW RESHMA S. CHARANIA HAS FILED HERE INC OME TAX RETURNS FROM A.Y. 2001-02 ONWARDS. I HAD OPENED THIS BANK AC COUNT ON 31-05- 2000 AND DEPOSITED MY DAUGHTERS SAVINGS OF RS.2,26,100/ - TOGETHER WITH MY DAUGHTER IN LAWS SAVINGS OF RS.59,420/- TOTALLING T O RS.2,82,520/-. THEREAFTER, I HAVE BEEN DEPOSITING ONLY MY DAUGHTER- IN-LAWS SAVING IN THIS BANK ACCOUNT, I.E. FROM 2002-03 ONWARDS. THE SAI D BANK THOUGH REPRESENTS SAVINGS OF MY DAUGHTER & MY DAUGHTER-IN-LAW, IS MAINTAINED IN MY NAME ALSO BECAUSE I WANTED TO SHOW A SOUND FINAN CIAL POSITION FOR OBTAINING USA VISA SO THAT I COULD TRAVEL TO USA TO M EET MY MARRIED DAUGHTER. 2.2 THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXP LAIN AS TO WHY THE ENTIRE CASH DEPOSIT MADE IN THE SAID BANK ACCOUNT S HOULD NOT BE TREATED AS UNEXPLAINED CASH CREDITS WITHIN THE MEANING OF S ECTION 68 OF THE I.T. ACT. THE ASSESSEE REITERATED THE SAID SUBMISSIONS AND FURTHER SUBMITTED THAT THE DEPOSITS WERE MADE TO SAFEGUARD THE SAVING S OF HIS DAUGHTER AND DAUGHTER-IN-LAW. IN HIS ALTERNATE CONTENTION IT WA S SUBMITTED THAT ONLY PEAK CREDIT CAN BE ADDED U/S.68 AND NOT THE ENTIRE AMOUNT. 3 2.3 HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT T HE SAID BANK ACCOUNT WAS NOT DISCLOSED AND THE TRANSACTIONS CARRIED OUT IN THE BANK ACCOUNT WAS ALSO NEVER DISCLOSED. EVEN IN THE FIRST QUESTI ONNAIRE ABOUT THE BANK DETAILS, THE ASSESSEE HAD NOT DISCLOSED THE SAID BA NK ACCOUNT AND DELIBERATELY CONCEALED THE DEPOSITS IN THE BANK ACC OUNT. IT WAS ONLY AFTER THE QUESTION PUT BY THE ASSESSING OFFICER AFTER DET ECTION OF THE SAID ACCOUNT THAT THE ASSESSEE GAVE THE REPLY WHICH ACCO RDING TO THE ASSESSING OFFICER IS AN AFTER-THOUGHT. ACCORDING T O THE ASSESSING OFFICER THE ASSESSEE COULD NOT EXPLAIN AS TO WHY MO NEY WAS NOT DEPOSITED IN THE BANK ACCOUNT OF THE RESPECTIVE PER SONS WHO ACCORDING TO THE ASSESSEE ARE INCOME-TAX ASSESSEES. REJECTING T HE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OF FICER DID NOT ACCEPT THE SOURCE OF VARIOUS DEPOSITS IN THE SAID ACCOUNT. HE, HOWEVER, ACCEPTED THE ALTERNATE CONTENTION OF THE ASSESSEE T HAT ONLY THE PEAK BALANCE SHOULD BE ADDED U/S.68. HE ACCORDINGLY MADE ADDITION OF RS.4,96,615/- U/S.68 OF THE I.T. ACT. THE ASSESSEE DID NOT PREFER ANY APPEAL BEFORE THE CIT(A). SUBSEQUENTLY, THE ASSESS ING OFFICER INITIATED THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. A CT. DURING THE PENALTY PROCEEDINGS THE ASSESSEE REITERATED THE SAME SUBMIS SIONS AS MADE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS. 3. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT TH E EXPLANATION GIVEN BY THE ASSESSEE FOR THE FOLLOWING REASONS : (I) NO EVIDENCE OF ANY INCOME OR SOURCE THEREOF IN HANDS OF UNMARRIED DAUGHTER (MS. SHABANA) TILL HER MARRIAGE A ND SUBSEQUENT MIGRATION TO USA. 4 (II) NO EVIDENCE OF ANY INCOME OR SOURCE THEREOF IN HANDS OF DAUGHTER-IN-LAW (MS. SMT. RESHMA S. CHARANIA) AS NO RE TURN OF INCOME HAS BEEN FILED. THERE IS NO REASON WHY S.T. RESHMA COU LD NOT OPEN SB A/C. AND KEPT SUCH CASH MONEY IN HER A/C. OR THAT OF HER HUSBAND. THE EXPLANATION OF ASSESSEE AND AFFIDAVITS OF MRS. RESHMA IS O NLY SELF-SERVING CONCOCTED AFTER DETECTION AND CONFRONTATION TO THE ASSESSEE OF THE EXISTENCE OF UNDISCLOSED BANK ACCOUNT. (III) THE ARGUMENT OF THE ASSESSEE THAT THE CASH DEPOSIT S WERE MADE IN ORDER TO SHOW FINANCIAL SOUNDNESS IN ORDER TO GET VISA F OR VISITING USA IS ALSO NOT SUPPORTED BY ANY INDEPENDENT EVIDENCE. THER E IS NO REASONS THAT SUCH IMPUGNED CASH TRANSACTIONS COULD NOT HAVE BEE N SHOWN IN THE ASSESSEES DISCLOSED BANK ACCOUNT. (IV) THERE IS ABSOLUTELY NO JUSTIFICATION FOR THE ASSESSEE NOT TO HAVE DISCLOSED THE BANK ACCOUNT HAVING THE IMPUGNED TRANSAC TION EVEN AFTER SPECIFIC QUERY BY PREDECESSOR. IT IS AN ACCOUNT WHICH WAS REGULARLY BEING OPERATED FOR CASH TRANSACTION AND COULD NOT HAVE BEEN A BONAFIDE OMISSION. HE ACCORDINGLY LEVIED PENALTY OF RS.1,55,000/- BEIN G PENALTY @100% OF THE TAX SOUGHT TO BE EVADED. 4. IN APPEAL THE LD.CIT(A) UPHELD THE PENALTY SO LE VIED BY THE ASSESSING OFFICER. WHILE DOING SO, HE OBSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO SATISFACTORILY EXPLAIN THE SOURCE OF C ASH DEPOSITS IN THE BANK ACCOUNT BEFORE THE ASSESSING OFFICER. THE EXPLANAT ION OF THE ASSESSEE THAT THE SOURCE OF DEPOSIT BEING EARNINGS OF THE DA UGHTER AND DAUGHTER-IN- LAW BY WAY OF TUITION WAS NOT SUPPORTED BY ANY EVID ENCE EXCEPT THE I.T. RETURNS WHICH DID NOT CARRY ANY DETAILS OR PROOF TO SUPPORT THE INCOME SHOWN IN THE RETURN OF INCOME. THE ASSESSEE WAS FU LLY AWARE OF THE UNDISCLOSED BANK ACCOUNT IN WHICH THE CASH WAS DEPO SITED AND THE SAID BANK ACCOUNT WAS NEVER DISCLOSED IN THE RETURN OF I NCOME FILED SUBSEQUENTLY AND, THEREFORE, THE ACTION ON THE PART OF THE ASSESSEE WAS DELIBERATE AND PRE-MEDITATED. RELYING ON VARIOUS D ECISIONS THE CIT(A) HELD THAT THE PRESUMPTION OF CONCEALMENT AS CONTAI NED IN EXPLANATION (1) TO SECTION 271(1)(C) OF THE ACT IS CLEARLY ATTR ACTED IN THE CASE OF THE ASSESSEE. HE FAILED TO REBUT THE PRESUMPTION OF CO NCEALMENT BY ADDUCING 5 RELEVANT, RELIABLE AND COGENT MATERIAL. THEREFORE, IT IS CLEAR THAT ALL THE FACTS RELATING TO EXPLANATION FOR THE INCOME IN SUP PORT OF WHICH PENALTY HAS BEEN IMPOSED HAVE NOT BEEN DISCLOSED BY THE ASS ESSEE VOLUNTARILY. HE ACCORDINGLY CONFIRMED THE PENALTY SO LEVIED BY T HE ASSESSING OFFICER. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER AND THE CIT(A) . THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE PROVISIONS OF SECTION 68 AND SECTION 271(1)(C) AND TRIED TO DISTI NGUISH THE WORDINGS IN BOTH THE PROVISIONS. HE SUBMITTED THAT THE ASSESSE E HAS GIVEN ALL POSSIBLE EXPLANATIONS WHICH THE ASSESSING OFFICER DID NOT AC CEPT. HE SUBMITTED THAT AS PER THE CUSTOMS OF THE COMMUNITY THE ASSESS EE BEING HEAD OF THE FAMILY WAS DUTY BOUND TO SAFEGUARD THE INTEREST OF HIS DAUGHTER AND DAUGHTER-IN-LAW. HE HAS MAINTAINED THE BANK ACCOUN T WHERE THE MONEY BELONGING TO HIS DAUGHTER AND DAUGHTER-IN-LAW WERE DEPOSITED. REFERRING TO THE AFFIDAVITS OF MS. SHABANA CHARANIA AND MS. R ESHMA CHARANIA (COPIES OF WHICH ARE PLACED AT PAGES 41 AND 42 OF T HE PAPER BOOK) HE SUBMITTED THAT THESE AFFIDAVITS WERE FILED BEFORE T HE ASSESSING OFFICER DURING THE COURSE OF PENALTY PROCEEDINGS AND THE AS SESSING OFFICER HAS NOT CONSIDERED THE SAME AT ALL. HE SUBMITTED THAT THE ADDITION IN THE INSTANT CASE MAY BE JUSTIFIED U/S.68 OF THE I.T. AC T BUT CERTAINLY, DOES NOT CALL FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. 5.1 REFERRING TO THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF BHIMJI BHANJEE AND CO. REPORTED IN 146 ITR 145 HE SUBMITTED 6 THAT THE HONBLE HIGH COURT IN THE SAID DECISION HA S DELETED THE PENALTY LEVIED ON THE GROUND THAT ALTHOUGH NO EVIDENCE WAS PRODUCED TO PROVE GENUINENESS OF CASH CREDITS FOUND IN THE BOOKS OF A CCOUNT OF THE ASSESSEE AND THE AMOUNT WAS ASSESSED AS INCOME FROM UNDISCLO SED SOURCES BUT IN ABSENCE OF ANY EVIDENCE OF CONCEALMENT OF INCOME PE NALTY WAS NOT JUSTIFIED. 5.2 REFERRING TO THE DECISION OF THE HONBLE GUJARA T HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT REPORTED IN 249 I TR 125 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HA S HELD THAT IN ORDER TO JUSTIFY LEVY OF PENALTY FOR ADDITION OF CASH CREDIT S THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO REASONABLE CON CLUSION THAT THE AMOUNT DOES REPRESENT ASSESSEES INCOME AND THE CIR CUMSTANCES MUST SHOW THAT THERE WAS CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PARTICULARS. EXPLANATION (1) DOES NOT M AKE THE ASSESSMENT CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT THE PE NALTY LEVIED BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) SHOULD B E DELETED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND T HE CIT(A). HE SUBMITTED THAT THE ASSESSEE HAS NOT FILED AFFIDAVIT S BEFORE THE ASSESSING OFFICER NOR THERE WAS ANY MENTION OF THE SAME IN TH E ORDER OF THE CIT(A). HE SUBMITTED THAT THE ACTION OF THE ASSESS EE IN NOT DISCLOSING THE BANK ACCOUNT IS NOT BONAFIDE AND THE BANK ACCOU NT WAS DETECTED ON THE BASIS OF AIR INFORMATION. THE VARIOUS DECISION S RELIED ON BY THE 7 LD.COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO T HE FACTS OF THE PRESENT CASE. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF T HE CIT(A) BE UPHELD. 7. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDE R REFERRING TO PAGES 43 AND 44 OF THE PAPER BOOK DREW THE ATTENTION OF T HE BENCH TO THE SUBMISSION BEFORE THE ASSESSING OFFICER IN RESPONSE TO NOTICE U/S.274 R.W.S. 271(1)(C) OF THE I.T. ACT. HE SUBMITTED THAT THE ASSESSEE IN THE SAID LETTER HAD ENCLOSED THE AFFIDAVITS OF THE DAUGHTER AND DAUGHTER-IN-LAW. EVEN THE AFFIDAVITS WERE ALSO ENCLOSED ALONG WITH R EPLY GIVEN TO THE CIT(A)DURING THE APPEAL PROCEEDINGS. THE ASSESSEE HAS NO CONTROL OVER THE ASSESSING OFFICER OR THE CIT(A) AS TO WHY THEY HAVE NOT MENTIONED ABOUT THE AFFIDAVITS. THEREFORE, THE SUBMISSION OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT AFFIDAVITS WERE NOT FILED IS NO T CORRECT. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DIS PUTE TO THE FACT THAT THE ASSESSEE HAS NOT DISCLOSED THE SAVINGS BANK ACCOUNT MAINTAINED WITH DENA BANK, PUNE CAMP BRANCH BEARING A/C. NO.19600. THERE IS ALSO NO DISPUTE TO THE FACT THAT IN THE SAID BANK ACCOUNT T OTAL CASH RS.15,19,500/- WAS DEPOSITED OUT OF WHICH THE ASSESSING OFFICER MA DE ADDITION OF RS.4,96,615/- BEING THE PEAK CREDIT IN THE SAID BAN K ACCOUNT. WE FIND THE ASSESSING OFFICER LEVIED PENALTY U/S.271(1)(C) ON T HIS AMOUNT WHICH HAS BEEN UPHELD BY THE CIT(A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS GIVEN AN EXPLANA TION TOWARDS THE SOURCE OF THE SAID DEPOSIT BEING THE INCOME OF THE DAUGHTER AND DAUGHTER- 8 IN-LAW WHICH WERE DEPOSITED IN THE SAID BANK ACCOUN T BELONGING TO THE ASSESSEE WHO IS THE HEAD OF THE FAMILY AND SINCE TH EY BELONG TO BHORI COMMUNITY IT IS CUSTOMARY TO KEEP THE MONEY WITH TH E HEAD OF THE FAMILY. WE FIND THE ASSESSEE HAD FILED AFFIDAVITS OF THE DAUGHTER AND DAUGHTER-IN-LAW BEFORE THE ASSESSING OFFICER DURING THE PENALTY PROCEEDINGS AND BEFORE THE CIT(A) DURING THE APPEAL PROCEEDINGS. HOWEVER, BOTH THE AUTHORITIES HAVE NOT CONSIDERED T HE SAME AND NOTHING IS COMING OUT OF THE ORDER OF THE ASSESSING OFFICER IN THE PENALTY ORDER OR THE CIT(A) IN HIS APPEAL ORDER. WE FIND THE ASSESS EE HAS GIVEN AN EXPLANATION BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AS WELL AS PENALTY PROCEEDINGS AND BEFO RE THE CIT(A) DURING THE APPEAL PROCEEDINGS WHICH MAY BE UNPROVED. HOWE VER, THE SAME HAS NOT BEEN DISPROVED EITHER BY THE DEPARTMENT. 8.1 WE FIND THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF NATIONAL TEXTILES VS. CIT(SUPRA) HAS HELD AS UNDER : 21. THE PROVISIONS OF S. 68 PERMITTING THE AO TO T REAT UNEXPLAINED CASH CREDIT AS INCOME ARE ENABLING PROVISIONS FOR MAKING CERTAIN ADDITIONS, WHERE THERE IS FAILURE BY THE ASSESSEE TO GIVE AN E XPLANATION OR WHERE THE EXPLANATION IS NOT TO THE SATISFACTION OF THE AO. H OWEVER, THE ADDITION MADE ON THIS COUNT WOULD NOT AUTOMATICALLY JUSTIFY IMPOSITI ON OF PENALTY UNDER S. 271(1)(C) BY RECOURSE ONLY TO EXPLN. 1 BELOW S. 271(1)(C). 22. IN ORDER TO JUSTIFY THE LEVY OF PENALTY, TWO FAC TORS MUST CO-EXIST, (I) THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESENT THE ASSESSEE'S INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT H AS BEEN ASSESSED AS INCOME, AND (II) THE CIRCUMSTANCES MUST SHOW THAT T HERE WAS ANIMUS I.E., CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACC URATE PARTICULARS ON THE PART OF THE ASSESSEE. THE EXPLANATION HAS NO BEARING ON FACTOR NO. 1 BUT IT HAS BEARING ONLY ON FACTOR NO. 2. THE EXPLANATION D OES NOT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUN T ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPO SED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTH ESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPO THESIS THAT IT DOES. IF A ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E., IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE R EASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE'S CASE IS FALSE, THE EX PLANATION CANNOT HELP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE. 9 23. ALTERNATIVELY, TREATING THE EXPLANATION AS DEALING WITH BOTH THE INGREDIENTS (I) AND (II) ABOVE, WHERE THE CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE 'S EXPLANATION IS FALSE, THE ASSESSEE MUST BE HELD TO HAVE PROVED THAT THERE WAS NO MENS REA OR GUILTY MIND ON HIS PART. EVEN IN THIS VIEW OF THE MATTER , THE EXPLANATION ALONE CANNOT JUSTIFY LEVY OF PENALTY. ABSENCE OF PROOF ACCEPTABLE TO THE DEPARTMENT CANNOT BE EQUATED WITH FRAUD OR WILFUL DEFAULT. AS WE FIND NO MATERIAL DIFFERENCE BETWEEN THE ORIGINAL EXPLN. 1 AND EXP LN. 1 AS SUBSTITUTED, IN OUR OPINION IT HAS TO BE SO CONSTRUED AS TO HARM ONISE IT WITH BASIC PRINCIPLES OF JUSTICE AND FAIRNESS, AS IN THE CASE OF ORIGINAL EXPLANATION. WE ARE GUIDED BY THE COMMENTARIES OF T HE LEARNED AUTHORS KANGA & PALKHIWALA, LAW AND PRACTISE OF INCOME TAX, VOL. 1, PP. 1637, 1639 TO 1640. 24. IN THE INSTANT CASE, THE CASH CREDITS WERE NOT SATISF ACTORILY EXPLAINED BY EVIDENCE AND DOCUMENTS. THE PARTIES WHO HAD ADVANC ED THE ALLEGED TEMPORARY LOANS WERE NEITHER DISCLOSED WITH THEIR PART ICULARS NOR ANY SUPPORTING DOCUMENTS WERE ON RECORD. ONLY 2 ENTRIES WE RE EXPLAINED. THE ACCOUNTANT WHO HAD ARRANGED THE LOAN WAS NOT PRO DUCED STATING THAT HE HAD LEFT THE SERVICE AND RELATIONS WITH HIM ARE STR AINED. ON THIS STATE OF ACCOUNTS AND EVIDENCE IN THE QUANTUM PROCEEDINGS, THE DEPARTMENT WAS JUSTIFIED IN TREATING THE CASH CREDIT AS INCOME OF THE ASSESSEE BUT MERELY ON THAT BASIS BY RECOURSE TO EXPLN. 1, PENALTY UNDER S. 271(1)(C) COULD NOT HAVE BEEN IMPOSED WITHOUT THE DEPARTMENT M AKING ANY OTHER EFFORT TO COME TO A CONCLUSION THAT THE CASH CREDITS C OULD IN NO CIRCUMSTANCES WOULD HAVE BEEN AMOUNTS RECEIVED AS TEMPO RARY LOANS FROM VARIOUS PARTIES. THE ASSESSEE IN THE QUANTUM PROCEED INGS FAILED TO PRODUCE THE ACCOUNTANT BUT THE DEPARTMENT ALSO IN PE NALTY PROCEEDINGS MADE NO EFFORT TO SUMMON HIM. APPLYING THE TEST (II) DISCUSSED ABOVE, THEREFORE, IT WAS A CASE WHERE THERE WAS NO CIRCUMSTAN CE TO LEAD TO A REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE'S CASE THAT THE CASH CREDITS WERE ARRANGED AS TEMPORARY LOANS, WAS FALSE. THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT IT COULD HAVE BEEN SUNDRY LOANS IN SMALL AMOUNTS OBTAINED FROM D IFFERENT PARTIES. IN OUR OPINION, THEREFORE, EVEN TAKING RECOURSE TO E XPLN. 1, SAME CIRCUMSTANCES OR STATE OF EVIDENCE ON WHICH THE CASH CR EDIT WERE TREATED AS INCOME, COULD NOT BY THEMSELVES JUSTIFY IMPOSITION OF PENALTY WITHOUT ANYTHING MORE ON RECORD PRODUCED BY THE ASSESSEE OR THE DEPARTMENT. 25. IN THE CONCLUSION, ALL THE QUESTIONS POSED, WHICH A RE INTERRELATED TO THE MAIN QUESTION OF IMPOSITION OF PENALTY UNDER S. 27 1(1)(C) OF THE ACT, ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE RE VENUE. THE REFERENCE IS ACCORDINGLY ANSWERED AND BE INFORMED TO THE TRIBUNAL. IN THE CIRCUMSTANCES, THE PARTIES SHALL BEAR THEIR OWN COST S. 8.2 CONSIDERING THE TOTALITY OF THE FACTS OF THE CA SE AND RESPECTFULLY FOLLOWING THE DECISION CITED ABOVE, WE ARE OF THE C ONSIDERED OPINION THAT ADDITION MAY BE JUSTIFIED U/S.68 OF THE I.T. ACT IN THE INSTANT CASE. HOWEVER, IT DOES NOT CALL FOR LEVY OF PENALTY U/S.2 71(1)(C) OF THE INCOME- TAX ACT. THE AUTHORITIES HAVE TO BRING SOMETHING M ORE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. IN THIS VIE W OF THE MATTER, WE SET- 10 ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESS ING OFFICER TO CANCEL THE PENALTY. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30-12-2013. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 30 TH DECEMBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-II, PUNE 4. THE CIT-II, PUNE 5. DR B BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE